Discontinued Operations

12 Months Ended

Aug. 31, 2014

Discontinued Operations and Disposal Groups [Abstract]

Discontinued Operations

2. Discontinued Operations

On December 17, 2013, the Company announced that it entered into a stock purchase agreement with iQor Holdings, Inc. (“iQor”) for the sale of Jabil’s Aftermarket Services (“AMS”) business for consideration of $725.0 million, which consists of $675.0 million in cash and an aggregate liquidation preference value of $50.0 million in Senior Non-Convertible Cumulative Preferred Stock of iQor that accretes dividends at an annual rate of 8 percent and is redeemable in nine years or upon a change in control. The final purchase price was reduced by $92.3 million for cash, indebtedness, taxes, interest and certain working capital accounts of the Company’s AMS business, and this adjustment is subject to final reconciliation. Also, as part of this transaction, the Company is subject to a limited covenant not to compete. On April 1, 2014, the Company completed the sale of the AMS business except for the Malaysian operations due to certain regulatory approvals that are still pending in that jurisdiction. As a result, $20.0 million associated with the Malaysian operations was included in escrow until the closing of the Malaysian operations, which is anticipated to occur once such approvals are obtained. In connection with the AMS transaction, the Company entered into a transition services agreement effective April 1, 2014 to provide certain administrative services to facilitate the orderly transfer of the business operations to iQor. This agreement is not material and the continuing cash flows are not significant. As of August 31, 2014, the Malaysian operations meet the criteria for classification as held for sale reporting and AMS meets the criteria for discontinued operations reporting because the Company does not have any significant continuing involvement in the operations of AMS after the disposal transaction and the operations and cash flows of AMS have been eliminated from the ongoing operations of the Company as a result of the disposal transaction.

The Company recognized a gain on sale of discontinued operations, net of tax, of approximately $223.3 million for the fiscal year ended August 31, 2014. The Company incurred direct transaction costs in connection with the sale of approximately $16.5 million during the fiscal year ended August 31, 2014, which is included in gain on sale of discontinued operations, net of tax. The income tax expense recognized on the gain on sale of discontinued operations during the fiscal year ended August 31, 2014 was significantly reduced to $7.6 million primarily due to the utilization of net operating loss related deferred tax assets with corresponding valuation allowances. At April 1, 2014, the fair value of the Senior Non-Convertible Cumulative Preferred Stock was approximately $33.2 million, which is included in gain on sale of discontinued operations, net of tax.

For all periods presented, the operating results associated with this business have been reclassified into income from discontinued operations, net of tax in the Consolidated Statements of Operations. The following table provides a summary of AMS amounts included in discontinued operations (in thousands):

	Fiscal year ended August 31,
	2014		2013		2012
Net revenue	$	586,652	$	1,087,401	$	1,011,236
Income from discontinued operations, before tax	$	26,694	$	58,950	$	72,351
Income tax expense		6,140		8,342		9,945
Income from discontinued operations, net of tax	$	20,554	$	50,608	$	62,406
Gain on sale of discontinued operations, before tax	$	230,878	$	—	$	—
Income tax expense		7,579		—		—
Gain on sale of discontinued operations, net of tax	$	223,299	$	—	$	—
Discontinued operations, net of tax	$	243,853	$	50,608	$	62,406